Global sourcing vs Local Sourcing for Effective Supply Chain

Jan 01, 2024 Chapter 1. Sourcing

In today’s supply chain, Local sourcing transforms to global sourcing of raw materials, components, and manufacturing are the standard rather than the exception. Businesses have been developing ties with third-party suppliers from outside their nation for several years. The manufacturing of goods that contribute to global trade is dispersed across a worldwide supply chain with numerous facilities.

Global sourcing has created new supply chain management issues that may change daily or hourly. Today, it entails getting production partners up and running early to avoid shortages and demand spikes before they occur. For example, Global procurement can massively benefit the supplier from buying a bike for your kid and cheap corporate gifts to mass supply.

It might be possible to scale down production in the future if demand changes. That adaptability is challenging to achieve, so supply chain leaders must know about global conditions. Through the lens of a strategic view on worldwide sourcing, more intelligent decisions can be made at the end of international sourcing.

Sourcing strategically, with redundancies in supply, all while keeping costs down. Today’s supply chain leaders must develop a sourcing strategy that includes logistics and raw material suppliers’ contingencies. Any sourcing expert should include trade conflicts, tariffs, and embargoes into their worldwide purchasing plan.

 

 

 

 

 

What is Global Sourcing?

Global sourcing is one of the most crucial responsibilities of running a supply chain. It’s critical to have a worldwide supply chain if you want one that spans the globe. This differs from international sourcing, which is concerned with purchasing and managing a global supply chain between just two countries.

For example, if a carmaker in Michigan buys floor mats from Canada but manufactures the rest of its components domestically, it is an international supply chain. Global sourcing is different; this is a complex supply chain with a global emphasis. The automaker obtains brakes from China, engine parts from Japan, and some component manufacturing in Mexico.

The ability to operate across several borders is critical to achieving a profit margin that will allow the firm to succeed. Global sourcing is essential for supply chain management since it will enable firms to increase operational efficiency and achieve healthy margins, making more money and investing in expansion.

It is worth restating that there are two types of sourcing:

  • short-term,
  • and long-term.

The total value of the supply chain (not just piece price) is determined by sourcing activities. Supply chain executives must consider several variables to establish a worldwide purchase procedure.

For example, strategic sourcing decisions consider logistical expenses and delivery time against raw material quality and price to develop the best sourcing plan. This approach must be consistent and supportive of the manufacturing operational strategy and the end-to-end supply chain plan.

 

Because of the danger of supply chain disruption, sourcing executives must also establish backup sourcing and logistics alternatives. We’ve seen the consequences and hazards of significant supply chain disruption in 2020, and sourcing teams are now considering risk differently as the world tries to deal with the health crisis.

A company’s risk factors, operational needs, and sales goals must be considered when developing a worldwide sourcing strategy. Modern technology is required to tackle complex business issues. Today’s supply chain managers can’t create and maintain a worldwide supply chain with only spreadsheets. Innovative global sourcing techniques are developed possibly with cutting-edge technologies like artificial intelligence (AI) and big data.

 

Pros and Cons of Global Sourcing

The main advantage of global sourcing is cost savings. International sourcing enables many foreign manufacturers to offer their services at very competitive prices, especially in regions where products are typically produced at low cost. Lower manufacturing costs will allow businesses to buy goods in bulk at lower prices, ideal for startups and businesses with limited budgets.

On a global supply chain, you’ll find that low cost is just one of the many benefits you get when sourcing products internationally. Let’s take a look at some of the additional benefits you can enjoy sourcing your products from overseas manufacturers.

 

Advantages of Global Sourcing:

  • You can get a wider variety of products than domestic.
  • Get unique, hard-to-find products that can attract more customers.
  • Having access to suppliers all over the world means you have more choices than you would at home.
  • Overseas suppliers are often more willing to work with small businesses or produce small batches of products.
  • You can increase your total supply capacity by using multiple suppliers globally or in different regions, which also protects you from supply chain problems caused by natural disasters.
  • You can acquire resources, materials or skills not found at home, such as the ability to produce specific types of products.
  • Sourcing overseas is a learning experience that can provide a stepping stone to developing new markets overseas.
  • Overseas manufacturers often have significant cost savings compared to domestic sourcing.

While the benefits are great, there are pros and cons to everything in life; this also applies to global sourcing. Here are some common pitfalls that can occur in international sourcing.

global sourcing flow chart

 

Disadvantages of Global Sourcing:

  • You may encounter different industrial or technical standards, which may or may not be the requirements of your home country.
  • Some restrictions can affect imports and exports on either end of the transaction, such as quotas and tariffs.
  • Documentation requirements for cross-border processes can be time-consuming and complex.
  • Currency exchange rates fluctuate.
  • Long time shipping time.
  • Hard to find a good fit supplier.

 

 

 

What is Local Sourcing?

Local sourcing refers to sourcing products or materials from manufacturers in the home country. Instead of going to international suppliers, you choose to buy from local manufacturers.

Shopping locally often comes at a price. Choosing to invest in a manufacturer in your home country may be more expensive than if you invest internationally. However, local sourcing may also be easier and faster.

If you need a quick turnaround, it might make sense to source from a local supplier who can make the product and deliver it within a certain amount of time, rather than worrying about shipping time.

 

 

Pros and Cons of Local Sourcing

Finding a local supplier can help your business save time and money. Here are some of the top reasons why you might consider sourcing locally instead of an international manufacturer.

 

The advantages of Local Sourcing.

  • Local sourcing is great for PR, it allows you to demonstrate your investment in your local community.
  • This is great for local suppliers who will benefit from serving and proud of the local community.
  • Local sourcing enables you to see exactly what you are paying for as you are able to travel to suppliers for development, management and site inspection purposes.
  • Sourcing specialty products from local suppliers becomes much easier as you can visit them regularly to explain your requirements face-to-face.
  • Shorten supply chains, which may (if lucky) lead to greater predictability of lead times.

 

There is an argument that more businesses should support their local economies by sourcing products and services from local manufacturers, however, the reality is that this is not always possible. Each country has its own resources and expertise.

It is important to source products from high-quality and reliable manufacturers to progress in business even if they are overseas. When your country is not as skilled in developing the products your business needs, trying to source locally puts you at a disadvantage and leads to problems along the way.

While local sourcing is great for public relations, here are some of the main reasons why international sourcing might be the way to go.

 

Disadvantages of Local Sourcing.

  • Close ties with local suppliers can lead to ethical issues when selecting suppliers.
  • If you’re terminating your contract with a local supplier, it could generate bad publicity locally.
  • You may not be able to find quality products in your own country.
  • Economic impacts in your home country may affect deliveries and supply chains.
  • You may develop resistance to change, especially when you need something innovative and new.
  • The suppliers you choose may depend on you as their main source of income.

 

 

 

Trends in Global Supply Chain Sourcing

Agility: The New Supply Chain Mantra

The future belongs to agile supply chains capable of swiftly adapting to emerging challenges. Procurement plays a crucial role in this transformation, enabling flexible sourcing and rapid adjustments to meet unforeseen hurdles.

Beyond Profit: Ethical and Sustainable Procurement

Three significant trends are shaping the post-pandemic supply chain landscape:

  • Environmentally Responsible Practices: Minimizing the environmental impact of raw and processed materials is becoming a central focus, driving investments in green logistics and sustainable sourcing strategies.
  • Diversity in Sourcing: Businesses are increasingly prioritizing sourcing diversity to support communities previously neglected by global procurement operations. Ethical sourcing practices that consider both human and ecological factors are becoming a cornerstone of purchasing strategies.
  • Procurement’s Rising Star: The critical role of supply chain and procurement has finally gained widespread recognition. Today’s challenges have illuminated the indispensable role procurement teams play in ensuring business continuity and resilience.

 

Navigating the Sourcing Landscape: Local vs. Global

When choosing a supplier or manufacturer, you face the critical decision of local vs. global sourcing. Both approaches offer unique advantages and drawbacks:

Local Sourcing:

  • Pros: Shorter lead times, reduced transportation costs, improved communication and quality control, and support for local communities.
  • Cons: Potentially higher costs due to limited supplier options, reliance on local availability of materials, and increased vulnerability to regional disruptions.

Global Sourcing:

  • Pros: Access to a broader range of suppliers and materials, potentially lower costs due to competitive bids, and diversification of risk across different regions.
  • Cons: Longer lead times, higher transportation costs, potential cultural and communication challenges, and increased exposure to global economic and political fluctuations.

 

Understanding the nuances of each approach is crucial for making informed sourcing decisions that align with your business goals and risk tolerance.

 

 

 

Three pillars of effective supply chain management are:

  • Procurement (Sourcing): This involves identifying, selecting, and managing relationships with reliable suppliers who can provide the right materials and services at the right price and time. It entails finding the best sources for raw materials, components, and finished goods, while negotiating favorable terms and ensuring quality control.
  • Planning (Scheduling): This focuses on optimizing the flow of materials, goods, and information throughout the supply chain. It involves forecasting demand, planning production schedules, managing inventory levels, and coordinating transportation logistics to ensure timely delivery and avoid shortages or overstocking.
  • Logistics (Delivery): This covers the physical movement of goods from the point of origin to the end customer. It includes activities like warehousing, packaging, transportation, and distribution, ensuring efficient and cost-effective delivery while maintaining product quality and integrity.

 

 

 

Global Sourcing Companies with Service Scope:

Global sourcing involves identifying and procuring goods and services from international suppliers. Partnering with a skilled global sourcing company can streamline this process, optimize costs, and unlock wider sourcing options for your business.

Here’s a glimpse into some of the leading players in the global sourcing arena:

 

Company Service Scope Key Strengths

Supplyia

Comprehensive sourcing solutions, supplier identification, quality control, transportation management Extensive global network, logistics expertise, technology integration

Quacn

Pre-shipment Inspection Quality control company

Li & Fung

Sourcing in Asian markets, product development, supplier management Deep knowledge of Asian suppliers, strong focus on cost optimization, apparel and electronics expertise

C.H. Robinson

Third-party logistics (3PL), global sourcing strategy, supplier negotiations Supply chain visibility, transportation management, cost reduction expertise

HCL Technologies

Digital sourcing solutions, procurement analytics, automation tools Technology-driven approach, data-based decision making, cost and time savings

SED International

Sourcing in emerging markets, raw materials, finished goods, manufacturing services Market expertise in emerging economies, specialized in hard-to-source materials

Global Sources

Online B2B platform, supplier directory, matchmaking services Vast supplier network, verified suppliers, trade show organization

Nisus Sourcing

Electronic components and equipment sourcing, Asian network Specialized in electronics industry, quality control focus, cost-effective solutions

Apex Supply Chain Management

Customized sourcing solutions, quality management, supplier qualification Flexible approach, focus on specific industry needs, global network

MJW Sourcing

Promotional products and merchandise sourcing, global supplier network Expertise in custom branding, design capabilities, reliable global partners

Source One International

Strategic sourcing, category management, supplier relationship management Comprehensive service offering, cost reduction strategies, long-term supplier partnerships

 

 

 

 

For B2B Buyer: Supplyia.com is Your One-stop Sourcing to Delivery Solution

Supplyia is a super-growth China product and drop-shipping sourcing company. We not even only handle Sourcing, also assist with international transport and 3PL. We are one of the most professional Sourcing and drop-shipping fulfillment partners in China, proven by our ability to focus on our customers’ needs while staying highly competitive.

During the past years, the products we sourced have been distributed to over 60 countries and regions by the thousands, and we still continue to offer that same level of service today. We look forward to cooperating with you and helping your business take off.

Rather than spend time on local sourcing with emailing factories in your home country and attempting to get in touch with a manufacturer overseas, head over to supplyia.com now to help you find a reliable, high-quality manufacturer that can offer you affordable bulk orders.

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